GlobalFoundries Q3 25 – Ready to Go

Revenue growth is all that is missing.

• GlobalFoundries reported good results, but concerns around its core smartphone business obscured the fact that diversification, a cheap valuation and great geopolitical positioning leave GlobalFoundries in the best position it has been in for some time.
• Q3 2025 revenues / EPS were $1.69bn / $0.44 ahead of estimates of $1.68bn / $0.38 as the non-smartphone business continued to expand and make up for the sluggish smartphone market.
• Other suppliers can continue growing smartphone revenue as the trend towards more expensive devices, both in iOS and Android, means that average prices are rising.
• GlobalFoundries is much less exposed to this trend, and so it appears to fare worse than many of its peers in a very slow-growing market.
• It is this concern that I think stopped the shares from reacting better on the back of this pretty good report.
• GlobalFoundries gave reasonable guidance for Q4 2025 with revenues / Adj-EPS of $1.75bn – $1.83bn / $0.42 – $0.52 just ahead of consensus of $1.80bn / $0.47.
• Hence, Q4 2025 will continue the trend where automotive, communications and data centre offset softness in the core smartphone segment, leading to flat revenue growth, but there are good improvements further down the financial statements.
• For example, gross margins have improved, and cash flow from operations and the net cash position all remain strong.
• Hence, there is cash available for investments in core areas where GlobalFoundries thinks it can make a difference.
• These are areas such as silicon photonics for communications and data centre networking, and FDX, which enables very low power in a range of different use cases.
• With everyone else focused on leading edge and AI, this combined with its geographic positioning outside of China’s orbit of influence, puts GlobalFoundries in a pretty good position.
• It also makes the company quite defensive should the AI bubble pop because smartphones, vehicles and so on will still be selling regardless of what the industry is doing in artificial intelligence.
• Furthermore, the stock’s weakness this year has meant that the valuation has dropped considerably, with 2025 PER now at 20.8x and 2026 at 18.3x.
• This is a far cry from where it was in 2023, meaning that the chief challenge for the company is to get revenue growth moving once again.
• This will take some time as smartphones still remain 45% of total revenues, but we are now at the stage where the other areas can have a meaningful impact on the top line.
• RFM Research thinks that the current deal between the USA and China is not going to last, and tension may start to rise again in a quarter or two.
• Anyone looking to diversify manufacturing away from China (many are) is going to have GlobalFoundries close to the top of their list, which in the long term could really help revenue return to steady growth.
• This, combined with its much more attractive valuation, keeps GlobalFoundries on my watch list as one to consider for a position.